Moving Towards a Low Carbon Power Sector: Options and Challenges

Transcription

1 Moving Towards a Low Carbon Power Sector: Options and Challenges Dr. Lola Infante Director, Generation Fuels and Market Analysis Global Workshop on Low Carbon Power Sector Development December 12, 2011 Washington, DC

2 Edison Electric Institute The Edison Electric Institute (EEI) is the association of U.S. Shareholder Owned Electric Companies. Our members serve 95 percent of the ultimate customers in the shareholderowned segment of the industry, and represent approximately 70 percent of the U.S. electric power industry. We also have more than 70 international electric companies as Affiliate Members, and more than 200 industry suppliers and related organizations as Associate Members.

3 Moving Towards a Low Carbon Power Sector Markets Policy Uncertainty Define the Options Predetermine the Challenges

4 The United States Big Rich in natural resources Large consumer of energy Federalism Different market structures Lacks comprehensive energy policy

5 The Power Sector is Getting Cleaner Electricity mix needs to provide affordable, reliable energy, efficiently, with minimal environmental impact. 60% affordable, consumers, environment Coal 50% 40% 30% Fuel Diversity 20% Nuclear Gas 10% Oil Hydro Other Renewables 0% Source: U.S. Department of Energy; Energy Information Administration (EIA)

6 Electric Generation 2015 Natural Gas 23.8% 2010 Nuclear 19.6% Hydro 6.2% Renewables 4.1% Petroleum, 1% Natural Gas, 24% Coal, 42% Nuclear, 20% Hydro, 7% Nonhydro, 6.1% Oil 0.9% Coal 44.9% Other 0.4% 2030 Natural Gas, 23% Nuclear, 18% Hydro, 6% Nonhydro, 8% Data source: DOE, Energy Information Administration Petroleum, 1% Coal, 43% If policies change, the mix will change Data source: DOE, Energy Information Administration, Annual Energy Outlook, 2011

7 Generation Capacity Trends Is there a winner? 80,000 Capacity additions (MW) 70,000 60,000 50,000 Renewables Gas Hydro Nuclear Coal 40,000 30,000 20,000 10, Source: Ventyx, Inc. The Velocity Suite

8 Generation Capacity Trends Anyone losing? 100,000 90,000 80,000 70,000 Capacity Additions Planned Additions 60,000 MW 50,000 40,000 30,000 20,000 10, Renewables Gas Hydro Nuclear Other Coal Data as of September 2011 Source, Ventyx, Inc., The Velocity Suite

9 Drivers of Generation Capacity: A simple equation? Policies and regulations Cost

10 The Utilities Balancing Act: Complexity with Uncertainty Infrastructure improvements Greener, smarter future Markets Environmental regulations Affordability Reliability Security

11 Divergent Forces Environmental Regulations

12 The Last Three Years Abbreviated FUEL DIVERSITY FUEL INTERRELATION

13 What s Shaping Energy Markets? Demand for electricity Environmental regulations Markets (costs and availability of fuels and technologies) Social realities/acceptance (renewables, nuclear, DG) Political realities (economic growth, budget, political preferences) Regulatory realities (consumer protection and preferences)

14 Natural Gas Trends Unconventional gas boom Prices still a factor Future of gas linked to the future of coal, nuclear and renewable energy Economic and regulatory new developments and uncertainty: How much and when? Economic recovery Climate policy and EPA regulations Baseload replacement and renewables development No regrets investment decisions

15 Natural Gas Trends Historical Forecast BCFD Source: Tristone Capital, Devon Energy

16 Natural Gas Trends CERA: Estimated recoverable shale gas resources outside of North America at between 5,000 and 16,000 trillion cubic feet (April 2009) U.S. Potential Gas Committee: U.S. gas resources estimated at 2,074 trillion cubic feet the highest resource evaluation in the committee s 44 history (June 2009) EIA: Natural gas proved reserves increased 11% over the year (Nov 2010) In the U.S., shale formations now account for more than 70% of total new production

17 Natural Gas Trends Abundant shale resources Shale formations now account for more than 70% of total new production Natural gas supply (tcf) Unconventional Gas Supplies LNG imports Pipeline imports Coalbed Methane Gas Shale Conventional (including tight gas) Consumption AEO Source: Department of Energy, the Energy Information Administration AEO 2011.

18 Natural Gas Trends Natural gas many aka s: Bridge fuel Destination fuel Swing fuel Natural Gas Consumption (tcf) 100% 90% 80% 70% 60% 50% 40% 30% 20% Electric Power Consumers Industrial Consumers Commercial and Residential Consumers Electric power consumption (Bcf) 8,000 7,000 6,000 5,000 4,000 3,000 2, % 1, Liquefied Natural Gas Pipeline Production Consumption AEO 2011 Consumption AEO 2008 Consumption AEO 2009 Consumption AEO % Largest growth potential from electric sector 0 Source: Department of Energy, the Energy Information Administration - AEO 2007, AEO 2008, AEO 2009, AEO 2010 and AEO 2011.

19 Natural Gas Trends Henry Hub Spot Prices Jan 00 Jul 00 Jan 01 Jul 01 Jan 02 Jul 02 Jan 03 Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Source: NYMEX Henry Hub Natural Gas Spot Prices (Monthly Average), and futures Henry Hub Futures Prices At 31/12/07 At 31/12/2008 At 12/28/2009 At 12/31/2010 At 03/31/2011 $/million BTU $/million BTU

20 Natural Gas Trends Challenges ahead Regulatory challenges Hydraulic fracturing EPA and state regulations Public opposition Drinking water contamination concerns and waste water/surface contamination GHG reduction implications Price level and volatility Pipeline access/availability

21 Coal Trends Coal use remains high, but share in electricity mix declining 4,500,000 60% 4,000,000 Coal 3,500,000 50% Thousand MWh 3,000,000 2,500,000 2,000,000 1,500,000 40% 30% 20% Nuclear 1,000,000 Gas 500, % 0% Oil Hydro Other Renewables Renewables Hydro Nuclear Natural Gas Oil Coal Sources: Department of Energy, Energy Information Administration

22 Coal Trends Coal s future is uncertain, dependent on timing of policy and technology developments Climate change Developments in CCS EPA: Transport Rule, Air Toxics Rule, 316b Numerous analyses on potential impacts of EPA rulemaking Every analysis uses different assumptions making comparison difficult Estimates of coal plant retirement range from ~30 to 70 GW None of the analyses consider future regulation of CO2 Cost competitiveness

23 Possible Timeline for Environmental Regulatory Requirements for the Utility Industry Revised Ozone NAAQS CAIR Vacated Begin CAIR Phase I Seasonal NOx Cap CAIR Remanded Ozone (O 3 ) Transport Rule proposal issued (CAIR Replacement) SO2 Primary NAAQS NO2 Primary NAAQS SOx/NOx Final Transport Rule Expected (CAIR Replacement) Ozone NAAQS Revision CO2 Regulation (PSD/BACT) SOX/NOx Secondary NAAQS GHG NSPS Final Effluent Guidelines proposed rule expected CAIR/Transport 316(b) final rule expected Effluent Guidelines Final rule expected PM Transport Rule Water 316(b) Compliance 3-4 yrs after final rule Effluent Guidelines Compliance 3-5 yrs after final rule '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 CAMR & Delisting Rule vacated Begin CAIR Phase I Annual NOx Cap Begin CAIR Phase I Annual SO2 Cap Proposed Rule for CCBs Management 316(b) proposed rule expected HAPs MACT proposed rule Next PM- 2.5 NAAQS Revision GHG NSPS Proposal Final Rule for CCBs Mgmt HAPs MACT final rule expected Ozone Transport Rule Transport Rule Phase I Reductions Transport Rule Phase II Reductions HAPS MACT Compliance 3 yrs after final rule Begin Compliance Requirements under Final CCB Rule (ground water monitoring, double liners, closure, dry ash conversion) PM/PM2.5 Ash Hg/HAPS CO2 -- Adapted from Wegman (EPA 2003) Updated

24 Coal Trends: the Big Unknown Carbon Capture and Storage Cost Technology Infrastructure Market Regulations

25 Nuclear Trends Capacity and generation have remained relatively constant Before and after Fukushima From the Nuclear Renaissance to a nuclear skepticism? Increased scrutiny of existing nuclear plants, particularly the older ones. Applications for new reactors will most likely undergo an even more robust review, but safety design features in new reactors should obviate issues raised by Fukushima.

26 Nuclear Trends Germany: temporary closure of its two oldest nuclear power plants. Suspension of plans to extend the life of all of the country s remaining plants. Switzerland: plans to build and replace nuclear plants on hold Austria: calls for atomic stress tests throughout Europe European Union: plans to assess Europe s preparedness in case of an emergency. Italy: one year moratorium on nuclear plans USA: talks of closing nuclear plants. Increased scrutiny of existing nuclear plants. Applications for new reactors will most likely undergo an even more robust review.

27 Nuclear Trends Proposed New Nuclear Plants U.S. Shareholder Owned Electric Utilities Company Site (State) Early Site Permit Design (# of Units) Expected Construction & Operating License Submittal Units under NRC Review DTE Energy Co. Fermi (MI) TBD ESBWR (1) September Dominion Resources Inc. North Anna (VA) Approved November ESBWR (1) November Duke Energy Corp. William States Lee (SC) AP1000 (2) December Entergy Corp. River Bend (LA) TBD September 2008 Exelon Corp. Clinton (IL) Approved March TBD TBD Exelon Corp. Victoria County (TX) Submitted March 2010 TBD TBD Florida Power & Light Turkey Point (FL) TBD AP1000 (2) June NuStart (Consortium) TVA Site Bellefonte (AL) AP1000 (2) October 2007 NuStart (Consortium) Entergy Site Grand Gulf (MS) Approved April TBD February 2008 PPL Corp. / Unistar Susquehanna, PA EPR (1) October Progress Energy Shearon Harris (NC) AP1000 (2) February Progress Energy Levy County (FL) AP1000 (2) July PSEG Lower Alloways Creek (NJ) Submitted May 2010 TBD TBD SCANA Corp. V.C. Summer (SC) AP1000 (2) March Southern Co. Vogtle (GA) Approved August 2009 AP1000 (2) March Southern Co. TBD TBD TBD TBD Energy Future Holdings Inc. (Luminant) Comanche Peak (TX) APWR (2) September UniStar (Constellation & Areva) Calvert Cliffs (MD) EPR (1) July 2007 & March UniStar (Constellation & Areva) Nine Mile Point (NY) EPR (1) September 2008 NRG Energy/STPNOC Matagorda (TX) ABWR 2) September Source: Nuclear Energy Institute, Nuclear Regulatory Commission, EEI Last updated May 2011

28 Nuclear Trends 450 Estimated Levelized Cost of New Generation, Transmission investment Fixed and Variable O&M Capital cost 2008$/MWh Source: DOE Energy Information Administration,Annual Energy Outlook, 2010

29 Renewable Energy Trends Rapid growth ( hiccup?) Biggest share of projects in the pipeline, but market saturation, cost, dependent on public support (policies, incentives) Budget considerations Increasing political and regulatory concern over the impact of highcost renewable generation on rates Increased pressure in other areas (i.e. EPA regulations) increases uncertainty and makes investment decisions all the more difficult

30 Renewable Energy trends: Rapid Growth in New Operating Capacity MW 70,000 60,000 50,000 40,000 Renewable energy installed capacity: 1991 (Dec): 14.1 GW 2001 (Dec): (July): 61.5 GW 30,000 20,000 10,000 0 Data source: Ventyx Inc, The Velocity Suite Wind Solar Biomass Geothermal

31 Renewable Energy Trends: Rapid Growth in Electricity Generation Generation , , , % 4.0% 3.5% Wind 56.2% 120, % Thousand MWh 100,000 80,000 60,000 40,000 20,000 0 Renewables share Biomass Geothermal Wind 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Solar 0.8% Geothermal 9.4% Biomass 33.7% Data source: Department of Energy, Energy Information Administration

32 Expected Online Schedule of Existing Renewable Project Announcements 350,000 MW 300, , ,000 Geotherm al Biomass 2% 7% 150,000 Solar 28% 100,000 Wind 59% 50,000 Ocean/Wa ve 4% Data source: Ventyx Inc., The Velocity Suite Data and status as of September 19, 2011 Proposed Permitted Under Const Operating

33 Renewable Energy Trends Opportunities Challenges Supply Prices for wind and solar falling Financial Incentives Financial Incentives? Cost even if declining Demand Out of market considerations State RPS Economic and technological environment Political and social acceptance Overall demand low Low natural gas prices Low wholesale market prices Regulatory/consumer push back Integration costs and challenges Transmission Developments in other fuels

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36 Renewable Energy Trends Incentives Tax credits (1603) were extended in December 2010 for one year. Set to expire Dec. 12, Increased pressure in Washington to reduce the fiscal deficit and streamline the tax code, possibly leading to the elimination of renewable tax credits: PTC? End of DOE loan guarantee program

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38 Trends Beyond Fuels Energy Storage Technologies Demand Response Energy Efficiency Distributed Generation Plug In Hybrid Electric Vehicles Drivers of demand and load shape Generation options and technology needs might change

39 Uncertainty is Driving Energy Choices Economic uncertainty Regulatory and legislative uncertainty Technological uncertainty Social acceptance uncertainty Environmental Regulations

40 What are the Risks and the Challenges? Natural gas Price level and volatility Hydraulic fracturing Other risks affecting availability and/or cost: pipeline, exports Renewable energy Cost and incentives Acceptance and legislation/regulation uncertainty Nuclear risks and uncertainties How much and when? Coal CCS?????

41 The Challenge: Low Carbon, Fuel Diversity, and Core Mission A lot of capital in a short time Defer/ cancel infrastructure projects Greater reliance in fuel with high volatile prices Maintain reliability And a few more Technology choices Increased interdepend ency in the industry Stranded assets Higher wholesale and retail prices Emissions Consumer preferences Fuel Diversity

42 The Real Challenge Infrastructure improvements Greener, smarter future Markets Environmental regulations Affordability Reliability Security

43 Thank you! Lola Infante (202)